G-Coins: Are There Any Advantages to Cryptocurrencies Backed by Gold?

Over the past few years, the world of cryptocurrencies has seen a rising trend in altcoins, which aim to replicate the success of Bitcoin. We previously discussed cryptocurrencies and their nature here on Smartereum, noting some of the more prominent digital altcoins. An interesting factor to consider is that most digital currencies have no backing; their value is dictated solely by how much someone is willing to pay for them. This, in part, explains their high volatility. But what if there was a digital currency backed by something more substantial? Gold, perhaps?

In February of this year, Toronto-based precious metals mining company Yamana Gold licensed Santa Clara-based fintech Emergent Technology’s blockchain supply chain solution. The technology enables companies to trace the origins of responsible, conflict-free gold through the entire chain from mining, to refining, and through to vaults. Using blockchain technology to facilitate smart contracts, everyone from the miners and refineries to logistics providers and insurance companies can therefore track the movement of the asset across an immutable digital ledger. Unblock reveals another significant outcome of this partnership — a new cryptocurrency, only this time, backed by gold.

Each G-Coin will be backed by 1 gram of conflict-free gold, with its value hinged to the market spot price of gold. In a news article by Mining Global regarding the value of G-Coin, Yamana CEO Peter Marrone remarked that G-Coin is a socially and economically responsible currency, backed by conflict-free gold. The advantage of this technology is two-fold: first, it is a commitment to human rights, which discourages armed conflict where precious metals are concerned; and second, G-Coin will act as a digital certificate to indicate the ownership of gold. It will be made available as both an investment class and new currency.

Unlike cryptocurrencies, where ownership is purely based on possession, G-Coin will enable specific ownership, of both the coin and gold. As a result, it could be used for wealth transfers, payment of goods, or investment and trading purposes. Despite a slight dip, gold is still classed as a very expensive and in-demand precious metal. It is no wonder then, that FXCM states that gold is still traded in a variety of ways. These include trading through futures, options, and contracts for difference (CFD). It is common, for instance, for traders to invest in gold over-the-counter through the New York Commodities exchange. Meanwhile, traders outside of the US often take the opportunity to invest in CFD trading, which allows traders to speculate on the price fluctuation of gold. This new development in gold-backed cryptocurrency further opens up new ways to invest in the precious metal.

With G-Coin, investors and traders around the world know the gold they buy is from responsible sources, backed by a supply chain that is auditable, irrefutable and transparent. Of course, G-coin isn’t the only gold-backed cryptocurrency. In fact, several others have emerged this year to offer ICOs. However, G-Coin is the only one claiming that theirs is backed by conflict-free gold. With considerably less volatility than Bitcoin and other cryptocurrencies, G-Coin and other gold-backed digital coins will, at the very least, always equal the current price of gold. This means that if their popularity rises, then the value of the coin will also increase. Who knows? It may even rise higher than the value of a gram of gold in the coming years.